China’s Economic Growth in the Second Quarter Remains Steady but not without a Price
In the second quarter, growth in China's economy remained almost at level with the first quarter but to keep the growth rate steady, the economy is paying a heavy price with a strong pace of credit creation.
China's economy grew 6.7 percent in Q1and the same followed in Q2. That shows the determination of the policymakers to regulate the speed of hold up following twenty five 25 years of swift expansion.
According to analysts, debt is rising dangerously and is six fold less effective at spawning growth compared to just few years back.
Ruchir Sharma, Morgan Stanley's head of emerging markets, said while in an event of a book launch in Singapore "The amount of debt that China has taken in the last 5-7 years is unprecedented. No developing country in history has taken on as much debt as China has taken on a marginal basis."
Although, the government is enjoying the comfort which loose money and added deficit spending are helping to avoid i.e. the painful slowdown but what they are missing are the fast retreating returns from stimulus policies and the accumulating defaults along with non-performing loans. Sharma says, these might be creating "fertile (ground) for some accident to happen."